Japan shares hit 3-week low as U.S.-China trade war escalates

* China unveils retaliatory tariffs on $75 bln worth of U.S.
goods
* Trump to raise existing tariffs on Chinese goods to 30% on
Oct 1
* U.S.-Japan trade talks progress, U.S. auto concessions
unlikely

By Tomo Uetake
TOKYO, Aug 26 (Reuters) - Japanese shares shed more than 2%
on Monday, with China-related firms leading the losses after a
fresh escalation in the Sino-U.S. trade war knocked global
equities markets.
The Nikkei share average .N225 fell as much as 2.6% to
20,173.76, its lowest level since Aug. 6, before closing at
20,261.04, 2.2% lower on the day.
"Developments over the weekend have taken the U.S.-China
trade war to a whole different level. No one can be naive enough
to think this will end anytime soon," said Norihiro Fujito,
chief investment strategist at Mitsubishi UFJ Morgan Stanley
(MUMSS).
China on Friday said it would impose tariffs on about $75
billion in imports from the United States including some
agricultural products, crude oil and small aircraft.
Hours later, U.S. President Donald Trump heaped an
additional 5% duty on some $550 billion in targeted Chinese
goods in the latest tit-for-tat escalation between the world's
largest economies. This sent stocks, the dollar and oil prices sharply lower on
Friday, with all three Wall Street major indexes shedding
between 2.4% and 3% on Friday, while safe-havens were in demand.
.N/C
The broader Topix .TOPX shed 1.6% to 1,478.03, with all of
Tokyo's 33 subindexes falling. It wiped out all its gains for
the year and down 1.1% year-to-date.
Machinery and chip-equipment makers were especially hit hard
as the new round tariffs triggered profit-taking in companies
which rely on China demand.
Yaskawa Electric 6506.T dived 6.1% and Fanuc Corp 6954.T
tumbled 3.6%, while Tokyo Electron 8035.T , TDK Corp 6762.T
and Screen Holdings 7735.T slid 3.0%, 3.1% and 3.2%,
respectively.
"One wonders how long these trade tariffs on both sides can
keep going up and up before they start making the economy and
stock market go down and down," said Chris Rupkey, chief
financial economist at MUFG Union Bank. "Investors have had
enough and want out."
Automakers and exporters were broadly lower after the yen
gained to 104.46 yen against the dollar JPY=EBS , a level not
seen since Jan. 3. Subaru Corp 7270.T lost 2.1% and Mazda
Motor 7261.T declined 2.2% and, while Omron Corp 6645.T shed
3.8%.
A strong yen reduces corporate profits when they are
repatriated. The yen last stood at 105.29 yen to the dollar.
President Trump and Japanese Prime Minister Shinzo Abe said
late Sunday that the United States and Japan agreed in principle
to core elements of a trade deal they hoped to sign in New York
next month. U.S. Trade Representative Robert Lighthizer said the deal
covered agriculture, industrial tariffs and digital trade, and
that auto tariffs would remain unchanged.
"The market is asking Prime Minister Abe if he really wants
to hike Japan's sales tax in October in this situation," said
MUMSS's Fujito. "If he does, that could weaken an already
fragile economy and corporate earnings even further."